Constructive Dismissal

UPDATED FOR 2022 – This practical guide is all about constructive dismissal – what it means, case examples and the core elements an employment tribunal will assess when deciding whether a claim should succeed.

Contents

What is constructive dismissal?
What is the timeframe for claiming constructive dismissal?
What is a fundamental breach of the employment contract?
Do I need two years service?
Do I need to resign immediately?
Constructive dismissal vs unfair dismissal – What’s the difference?
What is the implied term of trust and confidence?
Examples of constructive dismissal
Can I can claim constructive dismissal for discrimination?
Can I claim constructive dismissal for demotion?
What do you do if your employer is trying to make you quit?
Do you need to put in a grievance before resigning?
How do you write a resignation letter?
How to prove constructive dismissal?
What evidence do you need to win a constructive dismissal claim?
How much compensation do you get for constructive dismissal?
How to claim constructive dismissal?
How do I settle a constructive dismissal claim?
I’ve been furloughed without consent

What is constructive dismissal?

The definition of constructive dismissal is when an employee resigns within a reasonable period of time, in response to the employer’s fundamental breach of an express or implied term of the employment contract.

What does that mean?

There are four key elements to a constructive dismissal. (See below). It’s about how an employee can sue their employer and claim constructive dismissal – where the employee is forced to resign because the employer has committed a serious breach of the employment contract. The employer’s breach must be an effective cause of the employee’s resignation.

What is the timeframe for claiming constructive dismissal?

An employee must resign within a reasonable amount of time after the employer’s breach. There is not set time-limit for when the employee must resign – it will depend on the circumstances.

But if an employee leaves it a long time before they resign, it may look like they had in fact accepted the situation and things weren’t really so bad that they felt they had to leave. The longer things go on ‘as normal’ the more likely it is this will happen. It makes sense when you think about the situation the other way around. For example, where an employee commits an serious act of gross misconduct that would give the employer the right to dismiss them. If the employer doesn’t take action pretty quickly and leaves the employee to carry on working most employees would say it’s too late to start taking action months later.

It’s pretty much the same way with constructive dismissal. The employee needs to decide, or make their election, as to whether they are going to carry on or leave.

In cases where there is a single breach (one things goes wrong), like an unlawful suspension or non-payment of a contractual bonus, an employee is more likely to be expected to make their mind up reasonably quickly.

In more complex cases, for example where an employer suddenly insists an employee takes on a load of new duties, the employee may be able to argue he’s entitled to a little more time to assess the new duties and their impact.

Where an employee has made it clear they do not accept the breach (of their contract) and they are working under protest, while a grievance process is taking place, the employee will have a better chance of arguing they have not waited too long by seeing out the grievance procedure.

And an employee on sick leave may be argue it would be reasonable to have more time to decide whether to resign.

There may also be cases where there are continuing or fresh breaches which on their own (or when added together with past breaches) give the employee longer to decide whether to resign and treat themselves as constructively dismissed.

However, in summary, waiting too long will prejudice an otherwise potentially good claim.

What is a fundamental breach of the employment contract?

Express Terms

An express term is agreed by the employer and employee and is usually contained in a written employment contract but may also be agreed verbally.

The employer must fundamentally breach the employment contract – this is called a repudiatory breach. This requires more than an employer acting unreasonably. The breach has to be pretty serious.

There are many clear-cut examples of how employers breaching the employment contract, like an employer unilaterally reducing an employee’s pay or changing the employee’s duties, where it has no contractual right to do those things. But there other situations where the breach is not sufficiently serious.

Example – Let’s take an express term in the employment contract about pay. Most people would agree how much they get paid is fundamental. If the employer imposes a reduction in your pay (i.e. without your consent or the contractual right to do so) that will usually be a good ground for constructive dismissal. But an employer that fails to pay wages on time as per the contract may be in breach of an express term but this may not be sufficiently serious to entitle an employee to resign and claim constructive dismissal.

Implied Terms

Many constructive dismissal claims are based on a breach of an implied term, such as the duty of implied trust and confidence or the duty. Implied terms form part of the employment contract automatically by law – they do not need to be expressly agreed. Case law has developed this area of the law and we cover examples of constructive dismissal involving breaches of express and implied terms below.

Do I need two years service?

An employee usually needs at least two years qualifying service to bring a constructive unfair dismissal claim. However, some reasons are deemed automatically unfair in which case non minimal service is needed.

There is no minimum service requirement for a contractual claim of constructive wrongful dismissal. Generally speaking, however, an employee would only be able to recover damages for loss of notice pay and benefits for this kind of claim.

Do I need to resign immediately?

Applying basic contract law principles, an employee faced with their employer’s repudiatory breach should resign immediately without notice. However, an employee can bring a statutory claim of unfair dismissal where “the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer’s conduct.” (Section 95 (1) (c) ERA 1996).

So, serving and working contractual notice is not automatically fatal to a constructive unfair dismissal claim but where the notice period is long (or where the employee serves more notice than he is required) the employee may be deemed to have affirmed the contract and lose the right to claim constructive unfair dismissal.

In many situations an employee will resign with immediate effect because the situation is intolerable – and serving notice would undermine how serious the issue is.

Constructive dismissal vs unfair dismissal – what’s the difference?

Constructive Dismissal	Unfair Dismissal
Based on contract law principles	Based on statute
Requires a fundamental breach by the employer	Five potentially fair reasons to dismiss
Procedure not relevant (1)	Employer must follow a fair procedure
Reasonableness not relevant (2)	Decision to dismiss must be reasonable
ACAS Code not relevant (3)	ACAS Code compliance relevant to fairness

But in law both scenarios end up in a dismissal. So if an employee is constructively dismissed he will usually also have an unfair dismissal (subject to qualifying for the right to bring an unfair dismissal claim). So that’s where we get the phrase ‘constructive unfair dismissal’.

Footnotes for above table:

1. General fairness of the procedure is not relevant but if the employer breaches its own procedures, for example a disciplinary procedure, that form part of the employment contract, that will result in a breach of contract and become relevant. Similarly, case law has developed the implied right of an employee to have a grievance considered, so an employer’s failure to respond to a grievance may result in a breach of contract.

2. The implied term of trust and confidence is pretty close the idea that employers and employees should treat each other reasonably.

3. A failure to follow the ACAS Code on grievance procedures may result in any award being increased or decreased.

What is the implied term of trust and confidence?

An employer must not, without reasonable and proper cause, conduct itself in a manner calculated or likely to destroy the relationship of confidence and trust between the employer and the employee.

A few important considerations:

• If an employer has reasonable and proper cause to explain its actions, it won’t breach the implied term of trust and confidence.
• An employer must do worse than act unreasonably.
• The employers conduct must be so serious it is likely to destroy or seriously damage the relationship.
• This means only serious conduct will be likely to entitle an employee to say enough is enough, and treat themselves as constructively dismissed.
• The employee’s subjective view is not relevant. There will be no breach and the claim will fail unless objectively, the conduct meets the above test.
• The employer’s conduct does not necessarily need to be directed specifically at the employee. For example, in one case the employer’s corrupt and dishonest running of its business was sufficient to destroy the relationship.

Examples of constructive dismissal

• Unilaterally reducing an employees pay.
• Unilaterally changing an employees duties.
• Not paying the employee contractual pay or benefits.
• Refusing to investigate complaints promptly and reasonably.
• Unacceptable verbal abuse.
• Reprimanding in a degrading, intimidatory or humiliating manner.
• Undermining a supervisor by reprimanding them in front of their subordinates.
• Deliberately singling an employee out for special treatment, which is inferior to colleagues arbitrarily, capriciously and inequitably. For example, being the only employee not to get a pay rise).
• Serious breaches of internal disciplinary and grievance procedures.
• Knee-jerk suspension or unjustified suspension.
• Accusing an employee of theft without reasonable cause.
• Failing to give adequate support to enable an employee to carry out their duties without harassment from fellow employees.
• Failing to properly investigate allegations of sexual harassment or take complaints of harassment seriously.
• Imposing unreasonable conditions on the payment of a non-contractual discretionary bonus.
• Unreasonable reliance on a contractual right to relocate an employee to a difference place of work (under a mobility clause).
• Persistent failure to make reasonable adjustments as required by disability discrimination legislation (see below for more detail).

Can I can claim constructive dismissal for discrimination?

An employee may be able to rely on an act of discrimination to resign and claim constructive dismissal. Such a claim would usually be based on a breach of the implied term of trust and confidence.

However, a breach of a statutory law, such as discrimination legislation, will not automatically mean the employer has committed a repudiatory breach of the employment contract. Whether the statutory breach of the Equality Act 2010 (i.e. the discriminatory behaviour) amounts to a repudiatory breach of the employment contract will depend on the severity and nature of the discrimination.

An example of case where an act of disability discrimination, specifically a ‘serious’ failure to make reasonable adjustments, entitled the employee to resign and claim constructive dismissal, is Greenhof v Barnsley Metropolitan Borough Council [2006] IRLR 98.

“It seems to us in this case that the Employment Tribunal found unequivocally that there had been a serious breach of the obligation on the part of the Respondent over a period of time to make reasonable adjustments as it was obliged to do under the Disability Discrimination Act.

It follows, in our opinion, that that was almost bound to be a breach of the implied term of trust and confidence which Mr Greenhof would be entitled to treat as being a repudiatory breach of contract, as he purported to do. Now, it may be that there are circumstances in which there can be a breach of the obligation to make reasonable adjustments which might not be regarded as repudiatory, but we do not see how, having made the finding it did in the present case, there was any way in which the Respondent’s conduct could be regarded as anything other than repudiatory” (Para 10, EAT Judgment, Greenhof).

Can I claim constructive dismissal for demotion?

An employee who is demoted may be able to claim constructive dismissal, if the demotion is imposed and the employment contract does not allow the demotion.

Tips:

• Check the employment contract – it may give the employer flexibility to do change your role.
• If you have been demoted as an alternative to dismissal following a disciplinary check if the contract / handbook to see if the employer has a right to demote.
• If you’ve been seconded or promoted the contract may give the employer a right to demote.
• If the alternative role is offered as an alternative to redundancy, you should be given a choice whether to accept.

What do you do if your employer is trying to make you quit?

Consider how you can best gather evidence to show what’s going on.

If you want to fight for your job, raising a concern to with your manager informally first, or via HR, may be the best option, to give your employer a chance to find a solution.

Alternatively, getting out with a settlement agreement and finding a new job may be your preferred option. This may involve raising a grievance and speaking to HR about a severance package. This is where instructing a solicitor to help you frame your grievance and negotiate an exit package may help you to get a better outcome.

The nuclear option

If the situation is intolerable you could resign but this will, of course, have financial implications if you don’t have another job to go to. Once you resign, you then either have to walk away completely and lose out financially or fight for compensation via the tribunal system, if you can’t negotiate a fair settlement agreement.

Do you need to put in a grievance before resigning?

NO.

Raising a grievance might be a good idea but it is not essential to raise a grievance. The law recognises that if an employer has committed a repudiatory breach an employee does not have to wait around. Rather the employee may resign immediately.

BUT

If your claim of constructive dismissal succeeds, an employment tribunal can reduce compensation where an employee has unreasonably failed to raise a grievance. And if the employee’s objective is to remain in work, raising a grievance gives the employer a chance to address the employees concerns and put things right. There may also be tactical considerations as to whether for negotiating purposes it is better to resign immediately or raise a grievance. This is one area where advice from an employment solicitor can really help.

How do you write a resignation letter?

Generally speaking, if you’re thinking of bringing a constructive dismissal claim your resignation letter should clearly and succinctly summarise why you feel you had no choice but to resign.
Often, a short letter (no more than a page) has more impact.

Don’t

• waffle or exaggerate
• write pages and pages
• say how wonderful it’s been to work for your employer
• thank your employer for the ‘opportunity’
• forget that to succeed with a claim your employer’s breach needs to be an effective cause of your resignation.

Do

• be honest
• be concise
• be professional
• state your reasons for resigning / feeling your position has become intolerable
• summarise the most serious and recent conduct that has led to your decision.
• if there is a long history summarise it in a few paragraphs at most. Remember that this isn’t a witness statement, it’s a resignation letter.
• don’t be scared to say how your employer’s actions have made your feel.

How to prove constructive dismissal?

The burden of proof is on you to convince a tribunal your employer committed a breach of contract sufficient to entitle you to treat yourself as constructively dismissed.
How you prove that will depend on the nature of the breach.

Step 1 – You need to identify contractual term and prove it exists. If the breach involves an express term, you will offer as an example the document containing the relevant term. Usually this will be the written employment contract, bonus scheme, job description or handbook. If you are relying on the implied term of trust this is accepted to exist in every employment contract.

Step 2 – Prove your employer has fundamentally breached the contract.
If you’re relying on a ‘he said she said’ scenario, the tribunal will need to decide whether it prefers your account or your employer’s, assuming there is a dispute of fact.
While this may come down to witness evidence at tribunal, there will hopefully be some documentary evidence backing up your account.

Step 3 – You need to show you have responded to the breach within a reasonable period of time. This will mean producing evidence of when the breaches occurred and when you resigned.

What evidence do you need to win a constructive dismissal claim

• offer letter
• employment contract
• job description
• relevant emails and letters between you and your employer
• emails between managers and/or HR
• Diary entries / contemporaneous notes of incidents
• Witness statements from colleagues
• Notes and documents collated by your employer / HR team during internal investigations, disciplinary procedures and grievances

Securing evidence to prove you have been treated as you alleged can be difficult. One way of securing documents about you is to make a subject access request to your employer under the Data Protection Act 2018.

How much compensation do you get for constructive dismissal?

If you succeed with a constructive dismissal claim you will usally be awarded a Basic Award and a Compensatory Award.

A Basic Award is based on a formula that uses your length of service (in complete years + your age + your weekly gross pay (subject to a maximum cap). It’s the same formula used to calculate a statutory redundancy pay entitlement.

A tribunal will also make a Compensatory Award – which as the name suggests, is intended to compensate you (not punish the employer) for any loss of earnings or benefits you have suffered. Generally speaking a Compensatory Award is subject to a maximum of one years pay, or the current capped figure for the relevant year (£86,444, for dismissals from 6 April 2019).

How to claim constructive dismissal?

You will need to raise a claim with ACAS and then lodge a claim with the employment tribunal.

How do I settle a constructive dismissal claim?

Settling a constructive dismissal case rather than going to a tribunal has some major advantages, in terms of managing risk, avoiding delay and stress associated with bringing a claim. It also allows you to move on and focus on your future career. Bringing a tribunal claim can end up forcing you to relive negative experiences you’d rather forget.

Many employees make the mistake of overplaying their case and overvaluing their claim, assuming an employer will settle to avoid the legal costs of defending your claim. In reality, the biggest lever you have is to demonstrate to your employer you have a strong case and the evidence to back it up. A good employment solicitor will help you to identify your strong points, focus on those to maximum effect and achieve the best possible outcome.

I’ve been furloughed without consent

In light of the Coronavirus shutdown, the British Government has introduced a subsidy for employers to help pay employee wages. To qualify for this subsidy the employer must designate an an employee as having furloughed status.

This is a completely new concept in UK employment law – it means the employee is put on leave and doesn’t have to do any work.

Once an employee is ‘furloughed’ the employer can claim from the Government up to 80% of their wages (capped at £2,500). Because this is a completely new thing employers are very unlikely to have a right to place you on furlough, without your approval. But employees will need to think carefully before refusing, as the alternative may be your employer will look to lay them off without pay, or make them redundant.

Some employers will top-up the government’s contribution so you will continue to receive your full-pay during the furloughed period. If your employer refuses to top up and imposes furlough you may have claims for breach of contract, unlawful deduction of wages and potentially, for constructive unfair dismissal. But resigning is risky and it is likely that most employees will prefer to have up to 80% of their wages rather than resign. It also seems reasonable to expect that an employment tribunal will have significant sympathy for businesses trying to get through this difficult time.

If you really do object to being furloughed on 80% (capped at £2,500) speak to your employer about it. They may agree you can work from home, or offer you a redundancy package / settlement agreement.

Tip: Check whether your employer has a clause in your employment contract entitling your employer to lay you off without pay.

IMPORTANT

The contents of this page are guidance only and do not amount to (nor should they be considered) legal advice. If you require legal advice we recommend you speak to a specialist employment solicitor.